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Would you contribute to a voluntary CPP? Pape

Readers responses to the question indicate there is a lot of division among Canadians as to whether this is a good idea.

At least one of Gordon Pape's readers believes Finance Minister Joe Oliver and the Conservative government are trying to buy more votes from wealthy Canadians with their proposal to allow voluntary contributions to the CPP rather than a mandatory expansion.
CP FILE PHOTO

In my last column, I wrote about the Conservative government’s plan to study the feasibility of allowing supplementary voluntary contributions to the Canada Pension Plan (CPP). I ended by asking readers to send me an email with their response to the question: Would you contribute to a voluntary CPP?

A number of you replied and if this small sample group is any indication there is a lot of division among Canadians as to whether or not this is a good idea. Here’s one response from a reader in Newmarket who sees the proposal as a Conservative ploy to eventually terminate the whole program:

“I think that having voluntary contributions to the CPP would create an administrative nightmare, failing that it would increase the cost of administration. I believe that it would give the Conservatives in the long term an excuse to terminate the CPP by grandfathering it.

“Increasing (mandatory) contributions is the only way to go but before this is done the public should be made aware of just how wisely their contributions are being invested. They also should be made aware that the plan is not near collapse and that it is one of the best in the world.”– Allan M.

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Here’s another comment from a reader who sees the whole idea as a political ploy:

“It appears that (Finance Minister) Joe Oliver and the Conservative government are trying to buy more votes of the wealthy with their proposal to allow voluntary contributions to the CPP rather than a mandatory expansion. My concerns are:

“More perks for the wealthy. The Conservative Government has already given an incredible number of tax breaks for the wealthy such as TFSAs, family income splitting, which does not take into consideration a family being raised by a single parent, boutique tax credits for children’s fitness, children’s arts, etc. Who among the working poor and middle class can afford the expenses in order to take advantage of the non-refundable tax credit?

“Administration costs to operate such a scheme would be applied against all for the benefit of the few who could afford to take advantage of such a proposal.

“And at the very least another study funded by my tax dollars to ultimately benefit the wealthy. I oppose such a scheme and would support mandatory expansion of the CPP.”- Margaret M.

“I would not contribute to a voluntary CPP. I am not in favour of the Ontario mandated ORPP. I am in favour of keeping the current increased level of contribution on the TFSA and allowing Canadians to continue investing for retirement through RRSPs, RESPs, and non-registered vehicles.”– Yaz M.

But some readers really like the idea and would be happy to participate in a voluntary plan, given the chance:

“Given that after a quarter century of maxing out RRSP contributions to a major bank’s balanced fund while paying a fee of two per cent, and my net rate of return since inception has only been two per cent (before inflation), yes, if I had a second chance at life I would go with voluntary CPP contributions.”– Brian F.

“For those with little or no investment experience this may be a preferred option over trying to save through passive bank investment alternatives. The big advantage is that it is untouchable and will therefore be there for you in retirement. This can also be viewed as a disadvantage if you need the money earlier. All things considered I believe a voluntary increase in CPP contributions has a role to play for those that are either not capable or not interested in managing their investments.”– Rick A.

“I think that these contributions would be a good idea for people if:

“They are flexible enough so that the contribution can be varied from year to year to respond to individual circumstances;

“It is truly voluntary so that employers who already offer good defined contribution/group RRSPs are exempt from contributions;

“(The plan) can allow for transfer of funds from existing savings/RRSPs, etc.

“(The plan) is free from unfair rules such as the one that permits only one full pension to a surviving spouse even though the other spouse made a full/significant contribution to CPP for 35+ years.”– Maria B.

Judging by these comments, it appears there would be some support for a voluntary CPP. However, that could be eroded considerably if Queen’s Park pushes ahead with its planned mandatory Ontario pension plan, as it seems unlikely many people would want to contribute to both.

In any event, our readers have had their say. Now let’s see what the governments decide.

Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters. His website is www.BuildingWealth.ca

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